Depending on how an employer goes about things, terminating staff who are surplus to requirements, can have very different legal consequences. This article looks at the lessons for employers in this situation as apparent from decisions by the Fair Work Commission (FWC) and the Australian Industrial Relations Commission.

The Fair Work Act 2009 (the Act) is drafted in a way that provides a shield to unfair dismissal claims brought by employees where there is a “genuine redundancy” within the meaning of s 389 of the Act.

If an employer can demonstrate that termination was due to a genuine redundancy then the matter can go no further; the Fair Work Commission (FWC) does not have to (and indeed does not have power to) consider whether the dismissal was otherwise “harsh, unjust or unreasonable”.

This means that the criteria referred to in s 387 of the Act which the FWC considers in unfair dismissal applications – some of which go to whether procedural fairness was afforded to the employee – do not apply. For example, the question of whether an employee was unreasonably refused a support person in discussions relating to the dismissal (s 387(d)) will be irrelevant if termination was due to a genuine redundancy.

In the recent decision of Mr Muhammad Buttar v PFD Food Services Pty Ltd T/A PFD Food Services[2017] FWC 4409 (‘PFD’) the FWC has provided guidance on what an employer must do (or rather, must not do!) in order to avail itself of the “genuine redundancy” protection. In particular, the FWC discussed the obligations on employers relating to consultation and redeployment.

To briefly recap the genuine redundancy provisions (s 389 of the Act), a dismissal is a case of “genuine redundancy” if (and only if):

The person’s employer no longer requires the person’s job to be performed by anyone because of changes in the operational requirements of the employer’s enterprise;

The employer complied with any obligation in a modern award or enterprise agreement that applied to the employment to consult about the redundancy; and

It would not have been reasonable in all the circumstances for the person to be redeployed within the employer’s enterprise or the enterprise of an associated entity of the employer.

In PFD the FWC had no trouble in determining that PFD no longer required Mr Buttar’s job to be performed by anyone.

As to consultation, it was common ground that the Seafood Processing Award 2010 applied to Mr Buttar’s employment and that the award contained an obligation to consult regarding redundancies.

The FWC noted that the following consultation process took place:

In the week preceding 29 May 2017, Mr Buttar’s manager (Mr DeCasto) had formed the view that Mr Buttar – together with two of his colleagues – were likely to be made redundant;

Mr DeCasto met with Mr Buttar on 29 May 2017. The FWC noted that “… in the concluding part of the meeting Mr DeCasto told Mr Buttar that there was a restructure likely to occur and that Mr Buttar may be affected. No details of the restructure were provided nor of how it may affect Mr Buttar. Mr Buttar told Mr DeCasto that he would be prepared to work in many different roles if need be. The topic of the restructure was a short conversation lasting no more than 2 or 3 minutes.”

A further meeting occurred on 2 June 2017 at which all three employees were present and each of whom was handed a letter advising they were being made redundant with immediate effect.

In this final meeting the FWC noted that “Mr Buttar… questioned Mr DeCasto and expressed negative views. Mr Buttar told Mr DeCasto that he thought the dismissal unfair and that he could perform other roles.”

In assessing whether Mr Buttar had been consulted, the FWC had this to say:

“[42] I find that Mr DeCasto did not consult in any meaningful way with Mr Buttar about his decision to make him redundant, either on 29 May or on 2 June. There was nothing to prevent Mr DeCasto doing so on either of these days, or at any time in that week.

[43] Clause 8 of the Seafood Processing Award 2010 imposes a requirement on an employer to consult with an employee concerning major change that is likely to have significant effects on their employment. It compels an employer to discuss with the employees the introduction of the changes and take efforts to mitigate adverse impacts. The discussions must be as early as practicable after a definite decision is made. Clause 8.1(b)(ii) requires the employer to provide in writing to the employees all relevant information about the changes and their effects.

[44] I find that Mr DeCasto failed to consult Mr Buttar at all, let alone consult within the meaning of clause 8 of the Award. I reject PFD’s submission that the 29 May meeting was a consultation. At its highest, that discussion simply put Mr Buttar on notice that there may be a restructure in the near term and that it may affect him. The non-specific nature of the information conveyed by Mr DeCasto meant that Mr Buttar was entitled to form the view that the unspecified restructure may affect him positively or equally not affect him at all. He believed on reasonable grounds that he could just get on with his job without concern for his job security, which he did. In no sense did PFD provide Mr Buttar “a real opportunity to influence the decision maker”.“

A footnote to the phrase “a real opportunity to influence the decision maker” in the judgment referenced paragraph 25 of the case of CEPU v Vodaphone Network Pty Ltd (2001) PR911257 which concerned a consultation obligation contained within the Workplace Relations Act 1996 (the forerunner to the Act). In that case the Australian Industrial Relations Commission said:

“In deciding whether or not to make the orders sought I have considered the importance of consultation. Consultation is not perfunctory advice on what is about to happen. This is common misconception. Consultation is providing the individual, or other relevant persons, with a bona fide opportunity to influence the decision maker. Section 170GA(1)(b) of the [the Workplace Relations Act] speaks of measures to avert or minimise terminations or to mitigate the adverse effects of the terminations. Consultation is not joint decision making or even a negative or frustrating barrier to the prerogative of management to make decisions. Consultation allows the decision making process to be informed, particularly as it may effect the employment prospects of individuals. The opportunity to seek to avoid or mitigate the effects of a termination cannot be underestimated by those who wield power over those and their families who will the subject of the exercise of that power.“

What appears from the FWC’s reasoning in PFD is, that in order to satisfy the consultation obligations, the employer should have done more than meeting with Mr Buttar and giving him notice of the restructure and the fact that it might affect him.

Firstly, it should have given him full details of how the restructure might affect him. Secondly it should have given Mr Buttar an opportunity to influence the employer’s decisions in respect of the redundancy. The case implies that Mr Buttar could not have had a chance to influence the decision unless he was given specific information about how the restructure might affect him.

It also appears that the FWC was of the view that allowing an employee an opportunity to make comments concerning their redundancy after they had been told they are to be made redundant does not amount consultation (as the decision had already been made).

Having found that Mr Buttar had not been “consulted” in respect of the redundancy, it followed that his termination was not a genuinely redundancy within the meaning of the Act (on this ground alone).

However, the FWC also considered that the employer had not fulfilled separate requirements under the Act concerning redeployment. It had this to say:

“[50] I accept that Mr DeCasto completed a ‘Skills Matrix’ on 1 June 2017 to assess Mr Buttar’s capability for alternate roles. In the circumstances of this matter, I do not find that completing this matrix was an adequate or sufficient mechanism to discharge the statutory obligation to take reasonable steps to explore redeployment. It was a rushed job and Mr DeCasto did not seriously want to redeploy Mr Buttar. He wanted to save labour costs by having him out of the business. The Matrix only assessed capabilities, not alternate roles. It was unilaterally completed by Mr DeCasto. Mr Buttar was given no opportunity to provide input into what he considered to be his adaptable skill set.

[51] The Matrix was completed by Mr DeCasto on 1 June (the day before the redundancy letters were given to the three employees on 2 June) and the day after the letters were prepared for signature by the human resources department (31 May). Mr DeCasto had already decided to make Mr Buttar redundant, considered that he had no future in the business, and had unreasonably formed a negative attitude towards him by concluding that he had acted in a “menacing” manner on 29 May. I find that Mr DeCasto only gave fleeting thought to other roles, and dismissed them in his mind quickly. No other persons in the business in South Australia or elsewhere were spoken to about whether they had actual roles on offer that Mr Buttar could fill, or whether they were interested in employing him.“

Having lost the shield of a “genuine redundancy” the Fair Work Commission had then to consider whether the dismissal was “harsh, unjust or unreasonable“.

In doing so the FWC referred to matters such as the unreasonable refusal of a support person for Mr Buttar and the fact that Mr Buttar was given no opportunity to respond to the reasons informing the decision to make him redundant. It was also critical of the fact that at the final redundancy meeting, Mr Buttar was not dealt with on an individual basis.

In all of the circumstances the FWC found Mr Buttar to have been unfairly dismissed. The FWC subsequently ordered (in a separate hearing on remedy) that Mr Buttar’s employment be reinstated and that PFD must find him an alternative position on no less favourable terms than his previous role. PFD was also ordered to compensate Mr Buttar for his loss of earnings as a result of the dismissal.

This really brings into focus the consequences of businesses – especially large businesses – getting redundancies wrong. Often employers only consider the risk of unfair dismissal claims in financial terms, ie “what will the award of damages be?”. This case reminds us that the FWC can, and sometimes does, order employers to reinstate dismissed employees in alternative roles, even if their previous role is no longer available. This may well not be something the business is prepared for.

It is important to note, that where an employee is held not to be “genuinely redundant” it does not automatically follow that they have been unfairly dismissed. Indeed, there are a number of cases where it has been held that where consultation would not have had any prospect of changing the outcome, failure to consult will not mean the dismissal was unfair[1], see: Mawson v Escada Textilvertrieb[2011] FWA 4239. Presumably the same approach would be followed if an employer did not turn its mind to redeployment options, if it transpired that no opportunities for redeployment had existed.

That said, if an employer has not complied with consultation requirements (under an award / enterprise agreement) or the requirement to consider redeployment in a meaningful way, then the shield of “genuine redundancy” will not be available. The employer will therefore face the risk of a finding of unfair dismissal, perhaps on a merely procedural ground.

We consider the lessons to take from the PFD decision are that it is not sufficient to pay lip-service to consultation and redeployment. On the face of it, PFD had two meetings with the employee concerning the redundancy and had written evidence it had considered redeployment options (the skills matrix completed by the employer). This was found not to be enough in the circumstances.

In particular, we would advise employers to consider the following points when preparing for redundancies:

When consulting with employees in respect of restructures, employees should be given adequate information as to how the restructure may affect them (eg the potential for them to be made redundant).

Affected employees should – as far as possible – be given an opportunity to influence the decision on redundancies and to suggest alternatives.

Consultation should occur before the employee is told they are to be made redundant.

Redundancy meetings should be conducted with employees individually (wherever practicable).

Redeployment should be discussed with the employee and they should be asked to participate in a process of exploring alternative roles wherever practicable.

Consideration of redeployment options may require the making of meaningful enquiries in all parts of the business of the employer (and any of its associated entities) and should not occur in isolation to the facts.

The safest approach when dealing with redundancies is to assume that the FWC may hold that there has not been a “genuine redundancy“. Employers are therefore well-advised to afford employees steps to ensure procedural fairness as it would with other dismissals, such as inviting them to have a support person in meetings and ensuring that the reason for termination is clearly spelt out as due to redundancy.

[1] However, this would not seem to limit the ability to bring a claim for contravening the terms of a modern award or enterprise agreement in respect of the obligation to consult.

This article is not legal advice and the views and comments are of a general nature only. This article is not to be relied upon in substitution for detailed legal advice. This article first appeared on the SWAAB website and has been reproduced with permission.